I will protect your pensions. Nothing about your pension is going to change when I am governor. - Chris Christie, "An Open Letter to the Teachers of NJ" October, 2009

Thursday, March 24, 2011

More 50 Insane States

You could almost cut-paste this and run it in the Star-Ledger - from Alabama:

t's almost certain that the Legislature will require teachers and other public employees to pay more into their pension funds when the next budget year begins Oct. 1. It is a change that has been in the making for a long time.

Even before the recession began draining tax revenues from the education and General Fund budgets, the state's pension funds were on an unsustainable course. Employee contributions and investment income haven't been keeping pace with benefits paid to more and more retirees. As a result, lawmakers have had to take money that would have otherwise gone to the classroom and put it into pension funds run by the Retirement Systems of Alabama.

It has been clear for some time that the Legislature some day would have to increase either taxes or public employee pension contributions.

Today, the state is putting about $1 billion a year into RSA. That amount could increase by $745 million (or 77 percent) in eight years under today's contribution levels, according to RSA.

Regrettably, Alabama's pension problems are typical. According to a study done last year by a Northwestern University professor, Alabama is one of thirty states where public employee pension funds could go broke in the 2020s. The projected date for Alabama's is 2023.

Gov. Robert Bentley's proposed school budget would put more of the responsibility for funding the pension plans on the people who will benefit from them. Teachers' and other public employees' pension contributions would increase 50 percent over three years, from 5 percent of pay to 7.5 percent.

At the end of three years, the average teacher's annual contribution would increase by $1,200 a year. Unfortunately, there seems to be little prospect today that teachers and other public employees will see any raises over that period. We can all hope the economy does better than that.

The proposed increase in pension contributions isn't the only pension change looming for public employees. Today, the state pension plans allow someone with 25 years of state service to retire at age 55. Taxpayers can't be expected to support a generous benefit like that. The minimum retirement age needs to be raised, although that wouldn't begin to have an effect on the pension funds for years.

Paul Hubbert, executive secretary of the Alabama Education Association, calls the proposed pension increase a pay cut. At the least the increase will take a significant bite out of all public employees' disposable income. And for many it will mean hardship. But it is not as if public employees won't get their money back some day.

Teachers and other public employees also face other cuts in take-home pay. One proposal would eliminate two teacher work days from the school calendar to help balance the school budget. That, according to AEA, would cost the average teacher hundreds of dollars. Teachers and other public employees can also expect to see a significant spike in their health insurance premiums.

Under the circumstances, phasing in the pension increase over a longer period, if at all possible, is something the Legislature should consider.

Bentley has made a hard decision -- and he's headed in the right direction.

The themes the media push - or don't push - on teacher compensation always appear to be the same:

1) Any politician calling for cuts in teacher pay is making "hard decisions."

2) Apparently, those "hard decisions" must never include raising taxes on the wealthy and corporations.

3) Explanations need never be given for that; I guess we assume it's, you know, job creation or something...

4) Pensions are wrong because private employees no longer have them. Promises made to pubic employees are best just ignored.

5) The idea that society told public employees that they could accept less money up front to receive deferred compensation in the form of pensions need never be brought up.

7) Teachers must sacrifice because the economy is bad and some people don't even have jobs. The wealthy need not make the same sacrifice.

8) If teacher pay is actually cut - in a way no other industry has seen EVERYONE'S pay cut - well, meh...

9) We have to raise the minimum retirement age, even though it won't solve anything for years, because... um...

10) Never, ever, EVER mention that young people will look at their governments breaking promises to current workers because they won't tax the rich. Never consider that those young people will make their career decisions accordingly.

And so, me = broken record: this is all going to come back to haunt us.

ADDING: That professor who says the pension is going to "go broke" - what does he mean? Won't the current employees still be paying in? They may not have enough revenues to pay all obligations, but that's not "going broke."

It reminds me of the Social Security debate: it's not "going broke" either. And so I'm very cautious as to whether or not this is really the problem conservative politicians and the media say it is. Remember:

2 comments:

Hi Duke, you were kind enough to add a link of my blog to your site Uniting unions under one voice. I started over with a different one though. Its http://njunions.wordpress.com can you change that? Thanks alot! I love your blog, good info, I have reposted a few things to my blog, hope you dont mind. Im a firefighter married to a teacher so you can bet I am working as hard as I can to expose the truth.